avnt-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________

FORM 10-Q

________________________________________________

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2023


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission file number 1-16091

________________________________________________

AVIENT CORPORATION

(Exact name of registrant as specified in its charter)

________________________________________________


Ohio									34-1730488
(State or other jurisdiction									(I.R.S. Employer Identification No.)
of incorporation or organization)

Avient Center
33587 Walker Road									44012
Avon Lake, Ohio
(Address of principal executive offices)									(Zip Code)

Registrant’s telephone number, including area code: (440) 930-1000

Former name, former address and former fiscal year, if changed since last report: Not Applicable

_______________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, par value $.01 per share	AVNT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of the registrant’s outstanding common shares, par value $.01 per share, as of March 31, 2023 was 91,072,473.

AVIENT CORPORATION

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Avient Corporation

Condensed Consolidated Statements of Income (Unaudited)

(In millions, except per share data)


	Three Months Ended March 31,
	2023		2022
Sales	$	845.7	$	892.2
Cost of sales	598.1		637.8
Gross margin	247.6		254.4
Selling and administrative expense	190.5		152.2

Operating income	57.1		102.2
Interest expense, net	(28.8)		(16.9)

Other income (expense), net	0.7		(0.6)
Income from continuing operations before income taxes	29.0		84.7
Income tax expense	(7.7)		(20.0)
Net income from continuing operations	21.3		64.7
(Loss) income from discontinued operations, net of income taxes	(0.9)		19.8
Net income	$	20.4	$	84.5
Net income attributable to noncontrolling interests	(0.5)		(0.3)
Net income attributable to Avient common shareholders	$	19.9	$	84.2

Earnings (loss) per share attributable to Avient common shareholders - Basic
Continuing operations	$	0.23	$	0.70
Discontinued operations	(0.01)		0.22
Total	$	0.22	$	0.92

Earnings (loss) per share attributable to Avient common shareholders - Diluted
Continuing operations	$	0.23	$	0.70
Discontinued operations	(0.01)		0.21
Total	$	0.22	$	0.91

Weighted-average shares used to compute earnings per common share:
Basic	91.0		91.5
Dilutive impact of share-based compensation	0.8		0.8
Diluted	91.8		92.3

Anti-dilutive shares not included in diluted common shares outstanding	0.5		0.2

Cash dividends declared per share of common stock	$	0.2475	$	0.2375

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

1 AVIENT CORPORATION

Avient Corporation

Consolidated Statements of Comprehensive Income (Unaudited)

(In millions)


	Three Months Ended March 31,
	2023		2022
Net income	$	20.4	$	84.5
Other comprehensive income (loss), net of tax:
Translation adjustments and related hedging instruments	17.7		(9.2)
Cash flow hedges	—		1.3
Other	(1.6)		—
Total other comprehensive income (loss)	16.1		(7.9)
Total comprehensive income	36.5		76.6
Comprehensive income attributable to noncontrolling interests	(0.5)		(0.3)
Comprehensive income attributable to Avient common shareholders	$	36.0	$	76.3

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

2 AVIENT CORPORATION

Avient Corporation

Condensed Consolidated Balance Sheets

(In millions)


	(Unaudited) March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	582.7	$	641.1
Accounts receivable, net	484.4		440.6
Inventories, net	371.9		372.7

Other current assets	125.3		115.3
Total current assets	1,564.3		1,569.7
Property, net	1,045.7		1,049.2
Goodwill	1,689.7		1,671.9
Intangible assets, net	1,601.7		1,597.6


Other non-current assets	209.8		196.6
Total assets	$	6,111.2	$	6,085.0

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt	$	2.2	$	2.2
Accounts payable	448.1		454.4


Accrued expenses and other current liabilities	386.9		412.8
Total current liabilities	837.2		869.4
Non-current liabilities:
Long-term debt	2,177.7		2,176.7
Pension and other post-retirement benefits	66.2		67.2
Deferred income taxes	332.5		342.5


Other non-current liabilities	329.0		276.4
Total non-current liabilities	2,905.4		2,862.8

SHAREHOLDERS' EQUITY
Avient shareholders’ equity	2,349.8		2,334.5
Noncontrolling interest	18.8		18.3
Total equity	2,368.6		2,352.8
Total liabilities and equity	$	6,111.2	$	6,085.0

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

3 AVIENT CORPORATION

Avient Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)


	Three Months Ended March 31,
	2023		2022
Operating Activities
Net income	$	20.4	$	84.5
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization	48.7		35.7
Accelerated depreciation	1.8		2.1




Share-based compensation expense	3.2		3.2


Changes in assets and liabilities, net of the effect of acquisitions:
Increase in accounts receivable	(40.2)		(118.8)
Decrease (increase) in inventories	3.8		(15.1)
(Decrease) increase in accounts payable	(9.9)		90.5




Accrued expenses and other assets and liabilities, net	(50.0)		(63.2)


Net cash (used) provided by operating activities	(22.2)		18.9
Investing activities
Capital expenditures	(20.3)		(13.3)


Net proceeds from divestiture	7.3		—
Net cash used by investing activities	(13.0)		(13.3)
Financing activities



Purchase of common shares for treasury	—		(15.8)
Cash dividends paid	(22.5)		(21.7)

Repayment of long-term debt	(0.8)		(2.4)




Other financing	(2.3)		(3.9)
Net cash used by financing activities	(25.6)		(43.8)
Effect of exchange rate changes on cash	2.4		(0.4)
Decrease in cash and cash equivalents	(58.4)		(38.6)
Cash and cash equivalents at beginning of year	641.1		601.2
Cash and cash equivalents at end of period	$	582.7	$	562.6

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

4 AVIENT CORPORATION

Avient Corporation

Consolidated Statements of Shareholders' Equity (Unaudited)

(In millions)


	Common Shares		Shareholders’ Equity
	Common Shares	Common Shares Held in Treasury	Common Shares		Additional Paid-in Capital		Retained Earnings		Common Shares Held in Treasury		Accumulated Other Comprehensive (Loss) Income		Total Avient shareholders' equity		Non-controlling Interests		Total equity
Balance at January 1, 2023	122.2	(31.3)	$	1.2	$	1,520.5	$	1,823.6	$	(935.0)	$	(75.8)	$	2,334.5	$	18.3	$	2,352.8
Net income	—	—	—		—		19.9		—		—		19.9		0.5		20.4
Other comprehensive income	—	—	—		—		—		—		16.1		16.1		—		16.1

Cash dividends declared	—	—	—		—		(22.5)		—		—		(22.5)		—		(22.5)


Share-based compensation and exercise of awards	—	—	—		0.5		—		1.4		—		1.9		—		1.9

Balance at March 31, 2023	122.2	(31.3)	$	1.2	$	1,521.0	$	1,820.9	$	(933.6)	$	(59.7)	$	2,349.8	$	18.8	$	2,368.6


	Common Shares		Shareholders’ Equity
	Common Shares	Common Shares Held in Treasury	Common Shares		Additional Paid-in Capital		Retained Earnings		Common Shares Held in Treasury		Accumulated Other Comprehensive (Loss) Income		Total Avient shareholders' equity		Non-controlling Interests		Total equity
Balance at January 1, 2022	122.2	(30.6)	$	1.2	$	1,511.8	$	1,208.0	$	(900.7)	$	(45.6)	$	1,774.7	$	15.8	$	1,790.5
Net income	—	—	—		—		84.2		—		—		84.2		0.3		84.5
Other comprehensive loss	—	—	—		—		—		—		(7.9)		(7.9)		—		(7.9)

Cash dividends declared	—	—	—		—		(21.7)		—		—		(21.7)		—		(21.7)
Repurchase of common shares	—	(0.3)	—		—		—		(15.8)		—		(15.8)		—		(15.8)

Share-based compensation and exercise of awards	—	0.1	—		(2.2)		—		1.9		—		(0.3)		—		(0.3)

Balance at March 31, 2022	122.2	(30.8)	$	1.2	$	1,509.6	$	1,270.5	$	(914.6)	$	(53.5)	$	1,813.2	$	16.1	$	1,829.3

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

5 AVIENT CORPORATION

Avient Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 — BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Form 10-Q instructions and in the opinion of management contain all adjustments, including those that are normal, recurring and necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. These interim financial statements should be read in conjunction with the financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2022 of Avient Corporation. When used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “Avient” and the “Company” mean Avient Corporation and its consolidated subsidiaries.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be attained in subsequent periods or for the year ending December 31, 2023. Historical information has been retrospectively adjusted to reflect the classification of discontinued operations. Discontinued operations are further discussed in Note 3, Discontinued Operations.

Accounting Standards Adopted

Accounting Standards Update (ASU) 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50), provides guidance that requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the program and information about their obligations that are outstanding at the end of the reporting period. The Company has evaluated the impact of adopting this standard and has concluded that there is not material activity under supplier finance programs that would require disclosure within the notes to the consolidated financial statements.

Note 2 — BUSINESS COMBINATIONS

On September 1, 2022, the Company completed the acquisition of the DSM Protective Materials business, including the Dyneema® brand, the World's Strongest Fiber™. The ultra-light specialty fiber is used in demanding applications such as ballistic personal protection, marine and sustainable infrastructure, renewable energy, industrial protection and outdoor sports. The acquired business is collectively referred to as APM, and the acquisition is referred to as the APM Acquisition. The APM Acquisition enhances Avient's material offerings of composites and engineered fibers, and results are recognized within the Specialty Engineered Materials segment.

Total consideration paid by the Company to complete the APM Acquisition was $1.4 billion, net of cash acquired.

The APM Acquisition is being accounted for under the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 805. As of March 31, 2023, the purchase accounting for the APM Acquisition is preliminary and purchase price allocation adjustments will be made through the end of the Company's measurement period, which is not to exceed one year from the acquisition date. During the measurement period, we will continue to obtain information to assist in finalizing the fair values of assets acquired as well as the associated deferred income taxes and residual goodwill, which may differ materially from the preliminary estimates. There were no measurement period adjustments recorded during the three months ended March 31, 2023.

6 AVIENT CORPORATION

The preliminary purchase price allocation is as follows:


(in millions)	Preliminary Allocation
Cash and cash equivalents	$	50.7
Accounts receivable	54.0

Inventories	128.4
Other current assets	2.0
Property	395.1
Intangible assets:
Indefinite-lived trade names	254.9
Customer relationships	188.6
Patents, technology, and other	275.1
Goodwill	396.5



Other non-current assets	12.3
Accounts payable	32.2


Accrued expenses and other current liabilities	13.2
Deferred tax liabilities	220.0

Noncontrolling interests	2.3
Other non-current liabilities	13.1
Total purchase price consideration	$	1,476.8

Definite-lived intangible assets that have been acquired have a preliminary useful life range of 17 to 20 years. Goodwill of $396.5 million resulting from the acquisition was recorded to the Specialty Engineered Materials segment. The goodwill recognized is primarily attributable to intangible assets that do not qualify for separate recognition and the deferred tax impact of applying purchase accounting. Goodwill is not deductible for tax purposes.

Had the APM Acquisition occurred on January 1, 2021, sales and income from continuing operations before income taxes on a pro forma basis would have been as follows:


	Three Months Ended
		March 31, 2022
Sales		$	987.0
Income from continuing operations before income taxes		88.1

The unaudited pro forma financial information has been calculated after applying our accounting policies and adjusting the historical results with pro forma adjustments that assume the APM Acquisition occurred on January 1, 2021. These unaudited pro forma results do not represent financial results realized, nor are they intended to be a projection of future results.

The pro forma income from continuing operations before income taxes for the three months ended March 31, 2022 gives effect to intangible amortization from the preliminary purchase price allocation and increased interest expense resulting from the APM Acquisition financing transactions.

Note 3 — DISCONTINUED OPERATIONS

On November 1, 2022, Avient sold its Distribution business to an affiliate of H.I.G. Capital (the Purchaser) for $950.0 million in cash consideration, subject to a customary working capital adjustment. Total proceeds received were $935.5 million, of which $7.3 million was received in the period ended March 31, 2023. The results of the Distribution business are classified as discontinued operations for all periods presented.

The following table summarizes the major line items constituting pretax income of discontinued operations associated with the Distribution business for the three months ended March 31, 2023 and 2022.

7 AVIENT CORPORATION


	Three Months Ended March 31,
(In millions)	2023		2022
Sales	$	—	$	401.6
Cost of sales	—		362.2
Selling and administrative expense	0.3		13.0
Other expense	0.7		—
(Loss) income from discontinued operations before income taxes	(1.0)		26.4
Income tax expense	0.1		(6.6)
(Loss) income from discontinued operations, net of income taxes	$	(0.9)	$	19.8

Note 4 — GOODWILL AND INTANGIBLE ASSETS

Goodwill as of March 31, 2023 and December 31, 2022 and changes in the carrying amount of goodwill by segment were as follows:


(In millions)	Specialty Engineered Materials		Color, Additives and Inks		Total
Balance at December 31, 2022	$	652.2	$	1,019.7	$	1,671.9

Currency translation	7.2		10.6		17.8
Balance at March 31, 2023	$	659.4	$	1,030.3	$	1,689.7

Indefinite and finite-lived intangible assets consisted of the following:


	As of March 31, 2023
(In millions)	Acquisition Cost		Accumulated Amortization		Currency Translation		Net
Customer relationships	$	695.9	$	(172.8)	$	13.3	$	536.4
Patents, technology and other	841.8		(179.9)		15.3		677.2
Indefinite-lived trade names	368.0		—		20.1		388.1
Total	$	1,905.7	$	(352.7)	$	48.7	$	1,601.7


	As of December 31, 2022
(In millions)	Acquisition Cost		Accumulated Amortization		Currency Translation		Net
Customer relationships	$	695.9	$	(164.3)	$	5.9	$	537.5
Patents, technology and other	841.8		(168.8)		3.5		676.5
Indefinite-lived trade names	368.0		—		15.6		383.6
Total	$	1,905.7	$	(333.1)	$	25.0	$	1,597.6

Note 5 — EMPLOYEE SEPARATION AND RESTRUCTURING COSTS

We are engaged in a restructuring program associated with our integration of the Clariant Color Acquisition. These actions are expected to enable us to better serve customers, improve efficiency and deliver cost savings. We expect that the full restructuring plan will be implemented through 2024 and anticipate that we will incur approximately $75.0 million of charges in connection with the restructuring plan. As of March 31, 2023, $55.8 million has been incurred.

A summary of the Clariant Color integration restructuring is shown below:

8 AVIENT CORPORATION


(in millions)	Workforce reductions		Plant closing and other		Total






Balance at January 1, 2022	$	7.5	$	0.6	$	8.1
Restructuring costs	30.9		2.1		32.9
Payments, utilization and translation	(4.0)		(0.3)		(4.3)
Balance at December 31, 2022	$	34.4	$	2.3	$	36.7
Restructuring costs	1.3		2.3		3.6
Payments, utilization and translation	(2.6)		(1.8)		(4.5)
Balance at March 31, 2023	$	33.0	$	2.7	$	35.8

Additional headcount reductions were taken in the first quarter of 2023 as a result of global demand reductions, which resulted in a charge of $14.1 million recorded during the three months ended March 31, 2023.

Note 6 — INVENTORIES, NET

Components of Inventories, net are as follows:


(In millions)	As of March 31, 2023		As of December 31, 2022
Finished products	$	163.0	$	157.7
Work in process	26.1		22.7
Raw materials and supplies	182.8		192.3
Inventories, net	$	371.9	$	372.7

Note 7 — PROPERTY, NET

Components of Property, net are as follows:


(In millions)	As of March 31, 2023		As of December 31, 2022
Land and land improvements	$	104.4	$	103.5
Buildings	435.2		432.2
Machinery and equipment	1,352.0		1,325.3
Property, gross	1,891.6		1,861.0
Less accumulated depreciation	(845.9)		(811.8)
Property, net	$	1,045.7	$	1,049.2

Note 8 — INCOME TAXES

During the three months ended March 31, 2023, the Company’s effective tax rate of 26.6% was above the U.S. federal statutory rate of 21.0% primarily due to foreign withholding tax, tax on global intangible low-taxed income (GILTI), and an increase in foreign valuation allowances. These unfavorable items were partially offset by U.S. research and development credits, favorable foreign tax rate differential, and other favorable permanent tax items.

During the three months ended March 31, 2022, the Company’s effective tax rate of 23.5% was above the U.S. federal statutory rate of 21.0% primarily due to foreign withholding tax, GILTI, and state taxes. These unfavorable items were also partially offset U.S. research and development credits, favorable foreign tax rate differential, and other favorable permanent tax items.

Note 9 — FINANCING ARRANGEMENTS

Debt consists of the following instruments:

9 AVIENT CORPORATION


As of March 31, 2023 (in millions)	Principal Amount		Unamortized discount and debt issuance cost		Net Debt		Weighted average interest rate
Senior secured revolving credit facility due 2026	$	—	$	—	$	—	—	%
Senior secured term loan due 2026	426.9		3.0		423.9		7.54	%
Senior secured term loan due 2029	404.7		18.5		386.2		7.73	%
5.75% senior notes due 2025	650.0		4.3		645.7		5.75	%
7.125% senior notes due 2030	725.0		9.8		715.2		7.125	%
Other Debt	8.9		—		8.9
Total Debt	2,215.5		35.6		2,179.9
Less short-term and current portion of long-term debt	2.2		—		2.2
Total long-term debt, net of current portion	$

SEC Form 10-Q filed by Avient Corporation